Business Management

How Outsourcing & Automation Can Grow Your Real Estate Investing Business Like A Weed

Expertise:
1 Article Written
Outsourcing

Every Real Estate investment seminar I’ve attended and every business book I’ve read has talked about the importance of business systems. The ideas were groundbreaking, yet I couldn’t find anyone who had created and/or implemented systems in their investment business.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

When I started investing, I wore every hat. I found myself taking on daily duties inclusive of:

  • Marketing for buyers
  • Marketing for sellers
  • Marketing for tenants
  • Prescreening buyers, sellers, and tenants
  • Running CMA’s
  • Making offers
  • Coordinating closings
  • Coordinating funding
  • Managing contractors
  • Bookkeeping
  • Managing tenants
  • Coordinating evictions
  • Doing repairs

The list is endless. I consider myself a very capable individual, and fortunately I was able to hold things together for a while. Eventually I reached the point where everything became too overwhelming. I spent every waking hour of the day tending to my business, yet I wasn’t growing. In reality, I didn’t want to. The thought of more phone calls, more management, more anything made me sick.

I knew there had to be a better way, so I dedicated myself to finding an answer. I had a difficult time finding a real estate investor that ran their business like a business. Most did a few projects a year, managed their own properties, and handled everything themselves. So I looked to other industries.

As an investor, I had severe disdain for real estate agents who always seemed to hamper great deals with their lack of knowledge or arrogant attitude. Then everything changed. I read the book Millionaire Real Estate Agent and realized that agents existed who sold hundreds of houses per year. I found my answer and set out to model their success.

Benefits of Automation

Why would you spend time, money, or resources on business automation? For me, the biggest benefits have been increased income, increased opportunity, and the ability to take back control of my life. When you are personally responsible for every function in your business, it’s just a matter of time before you reach burnout, get sick, destroy your relationships, and ultimately destroy your business.

At a certain point, you reach a ceiling of achievement based on time constraints. In real estate, over 80% of the business is administrative and doesn’t produce revenue. If you free yourself of administrative burdens, you can focus your efforts on income producing activities and drastically increase your revenue and profits.

Additionally, you’ll become more efficient so you can evaluate market trends, new business opportunities, and spend time with your family.

Every time I talk with investors about business automation and outsourcing I hear the same common objections. The say that they don’t want a big business, can’t afford to outsource, or enjoy swinging a hammer. But that’s almost never the case. There are many levels of automation and outsourcing, most of which don’t require large chunks of capital or put your business on a trajectory to take over the world.

Breaking Down Automation

Business automation comes down to three ideas: Elimination, Automation, and Delegation. You need to eliminate activities that aren’t necessary, automate what’s left, and then delegate what you automated.

The first step is to find out where you currently spend your time. I suggest either carrying around an open notebook, or using a software tool or application, like Evernote, to record everything you do over the period of a week. After you have your list, mark which items generate revenue. The majority of the other activities are things that can, and should, be outsourced.

When I first did this activity 4 years ago, I realized that I spent the majority of my time handling property management. I was managing a little over 20 properties and I had no systems or software in place to help the process. I ran the numbers and realized that by paying a property manager it would cost me roughly $1600 per month, but I would free up about 85% of my time. I knew I could create more than $1600 in revenue by spending that time searching for new deals, so I made the decision to hire a property manager. I do the same 80/20 analysis every year to ensure that I constantly improve, and I highly suggest you do the same. Here are some of the tasks I recently found myself doing that I realized I could automate or outsource:

  • Physically going to the bank to send wires
  • Performing property inspections before writing an offer
  • Turning Utilities On/Off
  • Reviewing and organizing scholarship applications

At the time of this article I’ve been able to automate or outsource all of these tasks. I now use an online wire system, trained a trusted team member to do inspections, had my assistant create and implement a utilities checklist, and outsourced the organization of the scholarship applications to my virtual assistant in the Philippines for $2.86 per hour.

Every investor is at a different place in their business life cycle, which means the lowest hanging fruit will be different for each person. Remember, if you can pay a Virtual Assistant in the Philippines $3 per hour to do bookkeeping, you only make $3 per hour when you do the task yourself.

Here are a few items based on your experience level that are easy wins:

Beginning Investor – You will want to do the majority of the real estate related items yourself at first so that you learn the business and effectively hire and manage outsourcers in the future. Spend your time focused on generating leads and making offers. I suggest outsourcing bookkeeping, property repairs, short sale negotiation, and some parts of marketing as a great first step.

Intermediate Investor – With some transactions under your belt you are ready to take your business to the next level. Some initial big wins are to outsource property management, working with buyers, many marketing tasks, and all aspects of closing coordination.

Advanced Investor – Along with the aforementioned items, I suggest outsourcing day-to-day management of renovation projects, all contract creation and execution, initial CMA’s, and sales. The last piece to outsource will always be offer making and acquisition, which can be done with the right resource.

As your business continues to evolve and you leverage third parties, you’ll notice that you’re able to get more deals done and make more money. I’ve heard the great guru Ron Legrand says, “The less I do, the more I make.” It sounds counter intuitive, yet it’s the truth. Trust me, I spent 5 years stubbornly fighting and doing EVERYTHING in my business, and was ready to walk away because I was burned out. Proper outsourcing saved both my business and my sanity.

The reason and result of elimination is to generate more time to focus on income generating activities (IGA’s), which are generating leads and making offers.

In future posts I’m going to walk through all aspects of business automation and outsourcing including specifics on each task, when and how to hire an assistant, common mistakes, business structure, and the numbers you need to track and review daily. If you have questions or any other suggestions for future posts, please leave them in the comments below.

    Jay Castillo
    Replied over 6 years ago
    Hi Martin, While reading your blogpost, I kept telling myself this is all about applying what Tim Ferris wrote in “The 4-Hour Work Week” to real estate investing. Thanks for sharing how you did it! In our case, we are partnering with someone who can do most of the legwork, and we hope we can get it right. This should free us up to work on the business, instead of working in it. Wish me luck!
    Martin Orefice
    Replied over 6 years ago
    Hi Jay, you’re right on. The 4HWW has been a major influence in my business. Taking on a partner is a great way to leverage, although there are definitely trade offs as compared to hiring talent vs. giving up equity. Good luck!
    Jay Castillo
    Replied over 6 years ago
    Hi Martin, While reading your blogpost, I kept telling myself this is all about applying what Tim Ferris wrote in “The 4-Hour Work Week” to real estate investing. Thanks for sharing how you did it! In our case, we are partnering with someone who can do most of the legwork, and we hope we can get it right. This should free us up to work on the business, instead of working in it. Wish me luck!
    Mark Ferguson
    Replied over 6 years ago
    I have my staff do everything I don’t want to do. It works great!
    Martin Orefice
    Replied over 6 years ago
    Hi Mark, I agree. Being in business with talented people makes all the difference.
    Michael Woodward
    Replied over 6 years ago
    Thanks for the article Martin. I’m a HUGE fan of automation. In fact, I consider it the most important area of my business. I’ve been down the exact road you described and came to the same conclusion that automation and delegation are critical. Thanks again for sharing!
    Martin Orefice
    Replied over 6 years ago
    Hi Michael, have you noticed a difference in production when you started automating and delegating?
    Martin Orefice
    Replied over 6 years ago
    Hi Michael, have you noticed a difference in production when you started automating and delegating?
    Michael Woodward
    Replied over 6 years ago
    Thanks for the article Martin. I’m a HUGE fan of automation. In fact, I consider it the most important area of my business. I’ve been down the exact road you described and came to the same conclusion that automation and delegation are critical. Thanks again for sharing!
    Jeff Brown
    Replied over 6 years ago
    First things first — Welcome, Martin. I look forward to your posts after reading this one. Virtual assistant? I have a virtual CEO. Dad forgot to pass down the executive gene. 🙂
    Martin Orefice
    Replied over 6 years ago
    I love it! I need to get one of those 🙂
    Shawn Lynam
    Replied over 6 years ago
    Great information Marty! I remember the 4 hour work week filter to be delete, automate, delegate, then do it yourself. The day we can get out of MWAs, minimum wage activities, and replace with income producing activities, our income will go up. Marty does a good job of separating out some of those activities for investors.
    Chris L.
    Replied over 6 years ago
    Hi Martin, I’d like to say the article was very informative and that I look forward to your upcoming posts. As a newbie, I am trying to systemize my filing. I have spoken to other local investors to see how they handle their paper work. Their systems seem to work for them, yet seems a little confusing. Any suggestions as where to look in systemizing your filing for properties? Thanks
    Martin Orefice
    Replied over 6 years ago
    I use Dropbox and have shared folders with all team members. When we purchase a new property we copy and paste a folder template based on the type of property (Flip or Hold) that separates closing documents, improvements, marketing, etc. When we receive bills they are scanned and placed into the appropriate folder. I’ll make sure to outline the system in a future post. Thanks for the question!
    Bruce May
    Replied over 6 years ago
    Martin, good article and I’m really looking forward to the others you are going to write on the subject. I’ve outsourced a lot of my administrative duties but know I need to do more and I’m eager to read how you did it.
    Curt
    Replied over 6 years ago
    Any tips on automation tools? – source of VAs? – in bound voice message, press #1 systems – outbound voice / text blasters – live answer services – lead generation tools? craigslist scrapers etc, public records filtering automation? Also – smart phone aps? – track time and miles spent doing REI activities to keep as records for the IRS for our RE Professional election. tnx curt
    Martin Orefice
    Replied over 6 years ago
    Hi Curt, Thanks for the question. I plan on outlining all of the tools we use in a future post.
    Sid Hameed
    Replied over 6 years ago
    i use Odesk.com and Elance.com and we use Infustionsoft.com for our backend CMA and Squeezpages. I have outsourced my: / Marketing Dept, / Accounting Dept / Business Development / Dept In-bond sales calls / and Out- Bound sales calls. and receiving incoming calls to be answered by: answerfirst.com. we have been operating like this for the last 48 months and still building and developing more automation process and API codes such as with Quickbooks Now i have more time to just “be” and enjoy the moment. if you have more questions and need help. please write and thank you so much… enjoy your time. Sid Hameed
    Martin Orefice
    Replied over 6 years ago
    Hi Sid. Congratulations. It’s sounds like you’re well on your way to a 7th level business where you’re totally out of it. Question – What does outsourcing business development look like?
    Karen Margrave
    Replied over 6 years ago
    Great blog! Very helpful information. With all the questions being asked, Brandon Turner and Joshua Dorkin might want to do a Podcast with you. It’s so easy to get bogged down in the paperwork and details, when time could be better spent elsewhere. Thanks for the reminder. Reply Report comment
    Karen Margrave
    Replied over 6 years ago
    Great blog! Very helpful information. With all the questions being asked, Brandon Turner and Joshua Dorkin might want to do a Podcast with you. It’s so easy to get bogged down in the paperwork and details, when time could be better spent elsewhere. Thanks for the reminder.
    Karen Margrave
    Replied over 6 years ago
    Great blog! Very helpful information. With all the questions being asked, Brandon Turner and Joshua Dorkin might want to do a Podcast with you. It’s so easy to get bogged down in the paperwork and details, when time could be better spent elsewhere. Thanks for the reminder. Reply Report comment
    Ron Rolland
    Replied almost 6 years ago
    Martin you hit the nail on the head when you said “The reason and result of elimination is to generate more time to focus on income generating activities (IGA’s)…” At Taza Systems when I talking with a company that has an investment portfolio with RE assets about our Asset Management Portal specifically designed for this business application, after I show them how the automation of their work flow and the efficient management of their documents, emails and tasks will save them time; I remind them that these are not the end benefits. The real benefit of utilizing technology to gain efficiencies and economies, is that then you will have more time to concentrate on making better business decisions. Not only more time, but if you are utilizing a Cloud based solution that is capable of handling “big data” then you gain the insight from the analytics of that data that was previously only available to large companies with big IT budgets. Those businesses that take the automation step today will outperform their competitors and their peers in the future.
    Rex Halbeisen
    Replied almost 6 years ago
    Thanks Martin. Well written. Glad I found your blog. I will be an avid reader now! Keep up the good work.
    Matt Murphy Investor from Laveen, Arizona
    Replied over 3 years ago
    Great post! Some bigger pockets members were recently talking about automation recently. Thanks!!
    Curt Smith Rental Property Investor from Clarkston, GA
    Replied over 2 years ago
    Anyone have follow up, tools, stories using VAs in your business? I/m at a seminar describing using VAs by 123employee dot com . No feed back.